What is bartering?
First of all, I want to cover off what I mean by bartering.
Bartering is when you exchange goods or services with someone else.
It’s not for cash, it’s a straight-up swap of one good or service for another good or service.
Is it a good idea?
Now, sometimes people think this is a really good idea particularly when they’re new to business, is to barter with other people to get the goods and services that they require, and they provide goods and services in return.
There are very rare occasions where bartering works really, really well for both parties.
However, that is unfortunately, incredibly rare and there are significantly more stories about people who have tried bartering and it has failed spectacularly for them.
So I want to cover off why I think that bartering is not a good idea for your business even if you are just starting out and have no cash.
The first thing is that energetically, you are just showing that, I’m saying that you’re not open for business. If you’re not accepting cash to what you do, you are not standing by your pricing, you are not energetically open to receiving money for what you do, and therefore, it’s really a bad signal to the universe, quite frankly, that you are not open for business. And that is not how we want to start a business is by basically shutting down and saying, “I am not open for business”, because business is exchange money for goods and services. That’s how business works, because you can’t put food on the table with kind feelings and fairy dust. It takes cash. So that is something that we need to be aware of.
Bartering very, very often leads to one of the individuals, if not both, feeling like they’re not getting the value that they require for the service.
Now, the problem is that you’re very unlikely to meet somebody who has exactly the same price level for their services you do for yours for exactly the thing that you want to exchange it for. That really doesn’t happen.
Usually, somebody is kind of like, “Well yeah, I’ll do it for that, “I’ll do it for that equivalent.”
Somebody is always compromising in that relationship or one of the people’s like, “I don’t really need that but it’d be quite nice to have”, and therefore, there is a compromise that happens.
And when that compromise happens in that relationship, and there’s no cash exchanging hands, then it can lead to the person who has been compromised to feel like they got a bit of a rough deal.
And they might not feel it immediately, but within a few weeks or a few months they start to think, “Hmmm, hang on. I’m not sure about this.”
Working for free
It can also mean that you feel like you’re actually working for free because you’re not actually getting cash in exchange for the work you’re doing. So, you’re working hard for somebody, for your customer, your client, you’re not actually getting any physical money in return, can make it feel like you’re working for free.
That can also create a lot of resentment.
You can start to think, “Uh, this person has asked me to do something again, “they don’t like this, “or they want me to change that and I’m doing it for free?”
It can mean you don’t treat them like you would treat a standard-paying client, leading to poor service not on purpose but that’s just how it is. Leading to poor experience for the other person and therefore they don’t become a raving fan at all.
And you also then have the issue what if one person wants to stop using the service.
How do you untangle that, how do you unwind that , is the other person then willing to pay or not, and does the person feel that they bought enough value from the relationship up to this point of do they feel like any back payments might be required. Where does that sit?
The final issue is one that most people do not think about whatsoever, but if you barter for something, you are still required, if one or both of you is VAT registered, VAT is still payable, even if no cash changes hands.
This is a big piece that a lot of people who barter do not think about.
Now, it might be, of course, that neither of your has the VAT threshold and no one has to worry about it, but if one of you starts to reach the VAT threshold then you’ve got a problem.
And if one of you voluntarily registers for VAT, even if you’re not on the threshold, you’ve got an issue because that person has to then physically pay it over the VAT they would have charged had you been paying cash and that’s money out of their pocket, not only if the person that is VAT-registered having to deliver the service to you, they’re also having to pay the VAT over. Now, that’s not a fun position to be in at all because you’re actually paying money when you’re not receiving any to the VAT man.
So there are some big, big issues with bartering in people’s businesses that can lead to some places that you just don’t want to end up.
If you want a service, pay cash for a service.
If you don’t want a service, don’t take it.
Don’t try and fluff around with bartering because it really, really never pays in the long run and often, even in the short term, it can cause real, real issues.
Now, if you often get asked if you want to barter, you can just politely decline. You can say, “No, James, I’m sorry. I don’t barter.” I used to get asked, not infrequently, if I would barter. I just said no. Now, I mean it’s incredibly rare that it happens and it actually shocks me when somebody does say it ’cause I’m just not open to it at all. I do not think that it’s a good idea from my business point of view. I mean, if you barter with everybody, for all services in your business, you would still have zero revenue. You would have no money and you’d be working, blinking hard, that does not make sense at all because how do you feed your family when you’ve got no cash coming in unless you start bartering with the street market.
It just doesn’t make sense as a business decision.
It is not the position that some of you growing a business and stepping into CEO role takes, and that is the big reason why I believe that bartering is just not the right thing for businesses.